Headlines – Week of July 3, 2011

July 15, 2011

Many Forecasters Predict a 2011 Turning Point for U.S. Housing

A recent survey published by MacroMarkets LLC compiled from 108 responses of a diverse group of economists, real estate experts, investment and market strategists. The survey, the June 2011 Home Price Expectations Survey is based upon the projected path of the S&P/Case-Shiller U.S. National Home Price Index over the coming five years.

The June survey reveals that a significant majority of our panelists believe that the bottom for home prices arrived in the first quarter or will arrive sometime before year-end. Almost two-thirds of the panelists see the U.S. residential real estate market as at an historic turning point. However, the group of 69 panelists who are currently forecasting a 2011 turning point predict less than two percent average annual growth in nominal home prices over the five-year period ending December 2015.

Looking at expected housing market performance through the five year period ending 2015, the most optimistic quartile of panelists projects 15.3% average price growth, while the most pessimistic quartile of panelists projects 6.0% average price erosion from Q4 2010 levels.

With the prevalence of foreclosures across the county, analysts at the research firm Capital Economics are convinced that the double dip in home prices will continue throughout this year. And, as a result of certain structural factors that are constraining demand, such as higher down payment requirements, prices won’t rise consistently until 2014.

An easing in the flow of foreclosed homes may allow prices to fall at a more moderate pace and even stabilize next year at a level 35 percent below the 2006 peak. And, while prices tend to rise rapidly in the years after downturns, a “chronic lack of demand” means that home prices will probably be unchanged in both 2012 and 2013.

The proposed risk retention rules are being blamed for much of the loan demand, resulting in more lenders requiring a 20 percent down payment. This will lock more first-time buyers out of the market.

Also, at least half of all repeat buyers won’t be able to use their home equity to raise a 20 percent down payment since a quarter of them are in negative equity and another quarter have less than 20 percent positive equity. As a result, it doesn’t matter how attractive or affordable housing is with today’s low prices and low rates.

Adding to the supply side problem over the next few years up to three million foreclosed homes may come onto the market, adding to the current excess housing inventory of around two million homes and keeping supply higher than demand, further depressing property values.

Add this to the homes currently in the foreclosure pipeline and there may still be a “shadow inventory” of up to five million homes, according to Capital Economics’ calculations.

10 Best-Rated States for Retirement

Money-Rates.com recently published a list of the best and worst state for retirement.

The finance website looked at a number of factors to come up with a list of the 10 best states for retirement. The criteria include climate, crime rate, life expectancy and economic conditions such as cost of living, job opportunities and taxes.

The No. 1 state on the list might come as a surprise to many considering that it’s a long way away from the Sun Belt. Despite its climate challenges, New Hampshire is the best-rated state to retire to because of its super-low crime rate, modest living costs and reasonable tax burden. Hawaii came in second, thanks to gorgeous weather and long life expectancy, followed by South Dakota, which is both safe and affordable.

Here are all 10 best states for retirement according to Money-Rates.com:

When you think of the cities with the highest rates of foreclosures most people would first think of an area in Nevada, Arizona, Florida or California.

But, according to RealtyTrac, Chicago has now suddenly claimed the title as No. 1.

Housing experts say it’s from several factors, including foreclosure backlogs in courts and some have even blamed it on the stubbornness of banks there to lower prices far below the value of mortgage loans, which are causing homes to sit empty and linger on the market.

Foreclosed properties are selling at a much slower pace in Chicago than other metro areas too (except for New York). In the first five months of the year, 4,004 foreclosed homes in Phoenix were sold each month. However, for comparison, in Chicago, there were only 1,697 foreclosed home sales during that time, and 762 in New York.

According to RealtyTrac May 2011 data, here are the top three cities with the highest foreclosure inventories (homes owned by bank or were in the process foreclosure):

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